Summary
Ford Motor Company is disclosing an expected pre-tax remeasurement loss of approximately $3.0 billion for the year ended December 31, 2016, related to its pension and other postretirement employee benefit (OPEB) plans. This loss, driven primarily by lower discount rates compared to the previous year, will be recognized as a special item and will not affect the company's adjusted pre-tax profit or adjusted earnings per share, for which guidance of approximately $10.2 billion is maintained. While the remeasurement loss will reduce net income by an estimated $2.0 billion on an after-tax basis, it is important for investors to understand that this is a non-operational accounting event. The filing also provides updated figures on the underfunded status of Ford's pension and OPEB plans, which are expected to be approximately $8.9 billion and $5.9 billion respectively at year-end 2016, an increase from the prior year, largely due to the same lower discount rates impacting the remeasurement loss.
Key Highlights
- 1Ford anticipates a pre-tax remeasurement loss of approximately $3.0 billion for 2016 related to pension and OPEB plans.
- 2This loss is primarily driven by lower discount rates compared to year-end 2015.
- 3The remeasurement loss is treated as a special item and will not impact the company's total adjusted pre-tax profit or adjusted EPS.
- 4Ford reaffirms its guidance for total company adjusted pre-tax profit of about $10.2 billion for 2016.
- 5The after-tax impact of the remeasurement loss is expected to reduce net income by approximately $2.0 billion.
- 6The underfunded status of pension plans is expected to increase to $8.9 billion at year-end 2016 (from $8.2 billion in 2015).
- 7The underfunded status of OPEB plans is expected to increase to $5.9 billion at year-end 2016 (from $5.7 billion in 2015).